Press Release

VIS Reaffirms Ratings of Quaid-e-Azam Thermal Power (Private) Limited

Karachi, July 04, 2019: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Quaid-e-Azam Thermal Power (Private) Limited (QATPL) at ‘AA/A-1+’ (Double A/A-One Plus). The medium to long-term rating of ‘AA’ denotes high credit quality coupled with strong protection factors. Moreover, risk factors may vary slightly with possible changes in the economy. The short-term rating of ‘A-1+’ denotes highest certainty of timely payment, liquidity factors are outstanding and safety is just below risk free short-term obligations of Government of Pakistan. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on July 04, 2018.

QATPL is wholly owned by the Government of Punjab (GoPb). The company owns and operates re-liquefied Natural Gas (RLNG) based Combined Cycle Gas Turbine (CCGT) power plant of 1,183 MW generating capacity at Bhikki, District Sheikhupura - Punjab. The ratings draw comfort from the presence of a clause in the Power Purchase Agreement (PPA) whereby QATPL will continue to receive capacity payments during the period of non-supply of gas. In addition, the “Suspension” clause in the PPA allows the company to suspend its plant operations if the receivable amount from Central Power Purchase Agency (Guarantee) Limited (CPPA) at any point in time remains outstanding for 60 days or more, while QATPL will continue to receive capacity payments during the suspension period. This provision further protects the company from the circular debt risk.

The ratings also factor in positive earnings trajectory due to a combination of higher sales, strengthening of profit margins and improved liquidity position on the back of higher cash flows generation. Ratings also take into account the various financial covenants required to be maintained including Debt Service Coverage Ratio, Loan Life Coverage Ratio and Current Ratio. Revenues of the company are expected to sustain owing to a tariff based on fixed return on equity. While leverage indicators have weakened primarily with the mobilization of long-term borrowings, the company’s debt service coverage has become adequate on the back of improved cash flows from operations. The company has no plan to mobilize additional long-term borrowings while utilization of short-term borrowings may fluctuate with change in working capital requirements. The management believes that continuous retention of profits and scheduled repayments of long-term borrowings are expected to positively impact leverage indicators, going forward. The ratings remain dependent upon the strict adherence of PPA covenants by the CPPA and compliance of financial covenants by QATPL.

For further information on this rating announcement, please contact the undersigned at 021-35311861-70 or Mr. Maimoon Rasheed at 042-35723411-13.

Javed Callea

VIS Entity Rating Criteria: Corporates (May 2019)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited